Compliance and Investigations Newsletter No 10 – October 2022

[vc_row][vc_column][vc_column_text]The Compliance and Investigations Newsletter aims to provide information on the main media news, trends, cases and legislation concerning compliance matters, in Brazil and abroad. This material is for informational purposes and should not be used for decision making. Specific legal advice can be provided by our lawyers.

Enjoy your reading!

Compliance and Investigations Team[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Operation Retificadora: the Federal Revenue, Federal Police and MPF carry out operation against fraud involving companies of the Simples Nacional tax framework

The Federal Police, the Federal Prosecutor’s Office (“MPF”)  and the Brazilian Federal Revenue Office (“RFB”) carried out an operation in Belo Horizonte, Minas Gerais on October 06, 2022, against alleged frauds which supposedly caused an estimated loss of about BRL 44 million to the public treasury.

According to the investigations, third parties that identified themselves as “consultants” approached companies that opted for the Simples Nacional tax framework, claiming that they were entitled to tax restitution. The companies allegedly adjusted their income statements improperly, in order to change the nature of their gross revenue as resulted from the sale of products subject to single-stage taxation of the Social Integration Program (PIS) and Contribution to Social Security Financing (Cofins), which would result in a zero-rate tax for retailers. However, such trading either did not exist or amounted to considerably less than what was declared, thus resulting in undue restitution of amounts paid due to these taxes.

For more information, access the G1 and RFB articles.[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

CGU Regulation allows early judgment of Administrative Liability Proceedings (PAR)

On July 22, 2022, the Brazilian Office of the Comptroller-General (“CGU”) issued the Normative Ordinance No. 19/2022 (“Normative Ordinance”), which established the possibility of accused parties to request early judgment on the merits of Administrative Liability Proceedings (“PAR”), in exchange for the mitigation of sanctions provided for in Law No. 12,846/2013 (“Brazilian Anti-Corruption Law”).

The Ordinance innovates as it enables companies potentially involved in violations to the Brazilian Anti-Corruption Law to definitively resolve their pending matters, thus avoiding the commencement of a PAR or bringing forward the end of an ongoing PAR.

The early judgment is an instrument applicable to companies seeking to settle their disputes with the CGU, but potentially don’t possess new information and documents that allow them to enter into a leniency agreement.

In fact, the major differences between a leniency agreement and early judgment lays in the fact that for a leniency agreement, the beneficiary of the agreement can be granted a reduction of up to 2/3 (two thirds) in the amount of the fine, while for an early judgment there is no reduction of the fine, but rather the application of mitigating circumstances. Additionally, in the leniency agreement, the beneficiary is exempt from sanctions that prevent contracting with the public authorities, while in an early judgment, there is only the mitigation of such sanctions.

The Ordinance that regulates the early judgment establishes an incentive system that increasingly favors the requesting of early judgment in proportion to how early the claim is submitted, thus favoring procedural economy.

Upon submitting the request, the legal entity must acknowledge its strict liability for the illegal acts investigated, in addition to compensating any damage caused, waiving undue advantages and paying a fine, which will be reduced if the request for early judgment is accepted by the CGU, the government authority competent to approve or reject the proposal.

For more information, access the CGU website and Normative Ordinance No. 19/2022.[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

TST launches booklet on prevention of sexual and moral harassment in the workplace

The Superior Labor Court (“TST”) and the Superior Labor Justice Council (“CSJT”) have launched the booklet “Cartilha de Prevenção ao Assédio Moral e Sexual – Por um ambiente de trabalho mais positivo” (free translation, “Booklet on the Prevention against Moral and Sexual Harassment – ​​For a more positive work environment”), which employs an educational approach to illustrate everyday situations in the workplace that can potentially result in moral and sexual harassment.

The booklet points out the risks and potential harms of such practices, including practical examples and possible causes and consequences of these conducts. The publication also addresses methods of prevention and orientation aimed at victims and third parties regarding the best course of action when faced with moral and sexual harassment situations.

For more information, access the article published by the TST and the booklet.[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

The Federal Police and CGU carry out operation against bid rigging organization in Maranhão

On October 19, 2022, the Federal Police (“PF”) and the Brazilian Office of the Comptroller-General  (“CGU”) initiated “Operation Arconte”, in an effort to dismantle an alleged criminal organization that supposedly rigged biddings in the state of Maranhão to misappropriate public funds that were allocated to combat the COVID-19 pandemic.

According to an article by the CNN, the scheme allegedly involved irregular bidding waivers within the public health sector, which allowed the favoring of companies linked to certain government officials and healthcare entrepreneurs.

In the event that the allegations are confirmed, the suspects can answer for the crimes of bidding fraud, embezzlement, tax evasion, money laundering and conspiracy, with penalties that, combined, can amount 34 years in prison.

For more information, access the article published by the CNN.[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row]